Courts are reluctant to interfere with decisions by experts, but experts, if challenged, must be able to justify their reasoning. By Simon Murphy
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Key points |
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” Courts will rarely interfere with an expert’s decision, except on the ground of manifest error, which must be plain and obvious ” In assessing whether a manifest error has taken place, the court may look at the decision, at the lease and/or the parties’ submissions |
The difficulty of successfully challenging the determination of an expert rarely receives the scrutiny of the courts. Unlike arbitration, where the arbitrator’s powers are supplemented and controlled by the provisions of the Arbitration Act 1996, no strict controls prescribe the power and conduct of independent experts. Instead, the lease or other agreement provides the contract under which the expert is appointed and must act. Although he or she is liable in negligence to both parties, an award can be challenged only by arguing that the expert has breached the rules of “natural justice”, and that the decision, on the facts, is manifestly absurd.
Guidance on challenging an expert
Lord Denning, in Toepfer v Continental Grain Co [4] 1 Lloyd’s Rep 11, which concerned a certificate of inspection under an oil sale, set out guidance on the principles of challenging an expert’s decision:
” It is important for the operation of commerce that commercial men can rely upon the finality of a certificate.
” Even if the certifier admits his mistake, the court should uphold the finality of the certificate, save in the case of manifest error, which should be construed in a commercial context and must mean a “plain and obvious” error.
” The manifest error must relate to the certificate or the procedures making it.
” The court should take into account the parties’ technical knowledge of the testing procedure.
A rare opportunity
Accordingly, the courts have been very reluctant to interfere with the decision of an expert. However, Invensys plc v Automotive Sealing Systems Ltd [2] 1 All ER (Comm) 222 provided a rare opportunity for the courts to examine the methods of challenging such a decision.
The claim was made for sums due under an agreement that provided for expert determination of disputes by way of a sale and purchase agreement, under which the expert’s decision would be “final and binding except in the case of manifest error”. It was also agreed that the expert would give a summary of the reasoning that led to his decision.
When the expert determination was given, the defendant’s solicitors wrote to the expert, contending that part of the determination contained manifest errors. The expert was prepared to clarify the reasons for the decision in a short letter, although he stressed that he was not obliged to enter into such correspondence. His clarification was not accepted by the defendant’s solicitor. A further exchange of letters followed.
The court therefore had to consider:
” what material was examinable in deciding whether a manifest error had arisen; and
” had a manifest error actually taken place?
Material to be examined
There is virtually no authority on this point. The court held that it should consider the further reasons given by the expert, if any, because they represent “the totality of the reasoning”, the whole of which it was necessary to examine.
The court also found that it was permissible to:
” consider the documents expressly referred to in the determination, which formed an essential part of the determination;
” refer to submissions expressly referred to in the determination;
” have regard to the terms of the original agreement as a whole, which formed the subject matter of the determination.
Manifest error
The court stressed that finality was an important matter to consider when deciding whether the decision of an expert can be challenged. In the words of Thomas J:
“t is not enough that the expert has made a mistake; there must be a manifest or plain and obvious error. The meaning of the word “manifest” must not be understated – it is not possible to attack a determination purely because another view could properly be taken. There must be an obvious error in the determination.”
The court also emphasised that if a party failed to make its submissions clear and the expert decided against it, that party cannot then successfully claim that this amounted to a manifest error on the part of the expert. In order to prove a manifest error, one would need to show that the expert’s understanding of the subject matter contained a plain error, and that he had reached a conclusion that was not open to him on the ordinary reading of the submissions.
In the words of Thomas J:
“t is not enough for the purchaser to show that its interpretation of the agreement is right; it has to show that the expert’s interpretation of the agreement was obviously wrong.”
Conclusion
A court will rarely interfere with the decision of an expert. Faced with an unfavourable expert determination, every attempt should be made to obtain the expert’s reasons. The court can have regard to these reasons, together with the submissions and documents referred to, when considering the manifest absurdity or otherwise of the expert’s decision. If the determination does not include reasons and does not show how the expert has dealt with a potentially crucial point, it may be impossible to challenge the decision. All agreements that refer to an expert’s determination should require the expert to give a summary of the reasoning behind his or her decision.
Simon Murphy is a property litigation solicitor at Mills & Reeve
